It has been about a month since the last earnings report for Arris Group (ARRS). Shares have added about 0.3% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Arris Group due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
ARRIS Q3 Earnings Surpass Estimates, Revenues Lag
ARRIS reported mixed third-quarter 2018 financial results, wherein the bottom line beat the Zacks Consensus Estimate but the top line missed the same.
GAAP net income for the reported quarter came in at $47.1 million or 26 cents per share compared with $88.3 million or 47 cents per share in the year-earlier quarter. The decline was primarily attributable to a fall in the revenues.
Adjusted earnings for the quarter came in at 68 cents per share compared with 80 cents in the year-ago quarter. However, the figure surpassed the Zacks Consensus Estimate of 66 cents.
Quarterly GAAP revenues decreased 4.5% year over year to $1,651.2 million. Also, the figure, lagged the Zacks Consensus Estimate of $1,710 million.
Total operating expenses increased to $412.2 million from about $347 million in the prior-year quarter. Adjusted gross profit was $471.2 million compared with $438.1 million in the prior-year quarter for respective margins of 28.5% and 25.3%.
By segments, revenues from Network & Cloud fell 4.5% to $532 million in the third quarter, primarily due to decline in CMTS product sales.
Revenues from Customer Premises Equipment declined 19.9% to $941.5 million. The fall was primarily attributable to lower video sales, decline in cable and telco demand in the United States.
Enterprise revenues in the quarter came in at $180.2 million. Notably, the revenues were negatively impacted by an adjustment in estimated channel rebates of about $9 million.
Cash Flow & Balance Sheet
For the first nine months of 2018, the company generated $420.2 million of cash from operations compared with $611.7 million in the year-ago period.
As of Sep 30, 2018, ARRIS had cash and cash equivalents of $480.8 million with long-term debt & financing lease obligations (net of current portion) of $2,053.4 million compared with respective tallies of $1,379.8 million and $2,112.5 million a year ago.
Year to date, the company has repurchased approximately 13.9 million ordinary shares for $353 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
At this time, Arris Group has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of this revision looks promising. Notably, Arris Group has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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